Start-up sacks 40 employees amid $200 million valuation

A fast-growing start-up has sacked 40 employees despite doubling its valuation, with the company worth more than $200 million.

A fast-growing start-up has sacked 40 of its employees, despite its valuation soaring to more than $200 million.

InDebted calls itself a “new kind of debt collection agency”, one which is focused on customer experience by allowing people to use a digital, self-service portal to resolve their debts.

The company was founded by CEO Josh Foreman as a way of delivering a better debt collection experience for everyone involved by moving away from the “shortcomings” of traditional debt collection agencies.

The company quickly took off and has been growing in leaps and bounds in the fintech space, even doubling its valuation in a recent $22.5 million funding round, the AFR reported.

However, despite its success, the start-up still made the decision to lay off 40 employees just before the end of the financial year.

Most of the redundancies occurred within sales and marketing roles.

InDebted founder and CEO Josh Foreman. Picture: Supplied

According to the company’s website, it has a team of more than 280 people, so a loss of 40 employees is not insubstantial.

Mr Foreman said the decision was “incredibly difficult” but the changing economic environment meant it had to be done.

“Despite recently closing a $22.5 million funding round, like many other high growth start-ups on the same journey as us, we’re not immune from having to respond to the shifting economic environment which is likely to persist for the foreseeable future,” he told news.com.au.

“This included the incredibly difficult decision to say goodbye to 40 of our team members as we refocused our strategy to prioritise efficiency and sustainability over rapid scale and ‘growth at all costs’.”

InDebted has continually been heralded for its modern approach to working, even being named the 2022 AFR BOSS Best Place to Work.

The company offers a four-day work week, a work-from-anywhere policy, unlimited leave, and payment of a quarterly office stipend.

Mr Foreman said the fundamental values and “culture of transparency and compassion” remains the same, saying his staff has been very understanding of the recent redundancies.

“We led this process with empathy, placing wellbeing and support for employees at the centre of our decision making and our communication,” he said.

“Our team has since rallied together, and been incredibly understanding and adaptive of the recent changes.”

The start-up has been valued at more than $200 million.

In addition to severance payments, the employees leaving the company were also offered: access to transition support services, support in finding new work opportunities, access to InDebted’s employee assistance program for the next six months and accelerated access to equity.

All team members were also allowed to keep their laptops and all home office equipment provided by the company and US employees had access to their healthcare benefits for an extended six months.

“We’re continuing to support impacted employees through this transition, and a number of impacted staff have shared their appreciation and remarked that this process was led with empathy and respect,” Mr Foreman said.

The move comes just days after a venture capital firm issued a sobering message about the state of Australia’s start-up industry as tough market conditions bite.

Last week, Square Peg Capital sent a blunt email to investors admitting that they regretted pouring so much money into new businesses because Australia’s economic situation continues to worsen.

“In hindsight, our pace of investing should have been slower than it was,” Square Peg’s letter reads, per the Sydney Morning Herald.

“We had sufficient visibility to exit a number of positions and return substantial capital to you, however it was cognitive dissonance that prevented us from slowing down our cadence of new and follow-on investing.”

Square Peg Capital co-founder Paul Bassat. Picture: David Geraghty/The Australian

The company warned that more start-ups would fall in the next few years.

“The failure rate in our portfolio has been remarkably low for a number of years, and this is not sustainable,” the email continued.

“We will assess each situation dispassionately but also with a high level of transparency and empathy towards the founders.”

Dozens of companies have collapsed in the past few months as supply chain issues, rampant inflation and tighter spending against the backdrop of Australia’s cost of living crisis has driven many businesses into an early grave.

Several prominent start-ups have also succumbed to the economic crisis in recent weeks.

Square Peg warned investors that they shouldn’t expect as big a return on their investments as they got in previous years.

“We have slowed the cadence of investing in both new and existing portfolio companies,” the email said.

“We believe this is the right decision given the high level of uncertainty right now.”